Latest market data

Stock search

Legos are a white hot brand in a toy category that in 2013 saw $4
billion in sales. Those are impressive numbers – but those
numbers don’t matter much to frazzled parents trying hard to
keep the multi-colored bricks out of the vacuum. Those moms and
dads are more worried about how they can stop buying sets kids
plead for once and then forget forever. For these families, a
California-based startup might be able to lend a hand.

Launched last May, Pley rents
more than 250 different kinds of Lego sets for $15, $25 or $39 a
month (including shipping). Each Lego set is sanitized between
mailings. Toy rental reduces clutter for space-crunched
families, gives choices to fickle kids and eliminates waste, a
concern for eco-conscious parents. The service boasts more than
20,000 members and has secured $6.75 million in Series A funding.
Recently, it was also advertising 15 open jobs so that it could
expand further, which in the future might include subscription
offers to other types of toys made by major manufacturers or
smaller, independent players.

That is, of course, if the copycats don’t move in first. Some
competitors include Spark
Box and Just Play Toy
Rental. They also include Toygaroo, a SharkTank
darling which filed for bankruptcy
a year after receiving funding from both Mark Cuban and Kevin
O’Leary. That domain has been purchased by new owners and a
rebrand will focus solely on Lego rentals. The shared services
space is a crowded one with even Amazon entering the fray, says
Lisa Gansky, a startup investor and author of the book The
Mesh: Why the Future of Business is Sharing. “Pley should be
paranoid that others are standing by and will [jump in] as soon
as they are able to.”

Pley plans to build its business one brick at a time. Instead of
offering a range of categories, like dolls or action figures, the
company is growing its membership base exclusively with
Legos—which could help sidestep having to follow trends in an
industry where kids are notoriously fickle. Says Gansky, "It's a
pretty sexy offering and it will carry them for some time."
Indeed, the challenge for Pley is remaining focused and exploring
one corner of the market extremely well, "because there’s a
tendency to do 15 other toys—like Thomas the Tank Engine and
Barbie, and there’s a huge market for them,” says Ranan Lachman,
Pley’s co-founder and CEO. “Strategically, you can expand your
market to [younger] or older kids but the challenge is to be
really focused on Lego.”

This method helps Pley master a category while defraying ramp up
costs. Sets Pley rents out are either newly purchased or bought
pre-owned from families. Parents can earn $5 of Pley credit for
each pound of Legos they trade in and this summer will get a
month’s free subscription for the same amount of bricks. This
incentive serves parents while helping with one of the concept’s
most important expenses: the bricks themselves.

Pley owes much to a business model it blatantly borrowed from
Netflix and applied to the
U.S. toy industry, where consumers shell out more than
$22 billion each year for shiny new building sets, action
figures, puzzles and other games. Lachman actually moved to Santa
Clara from New York specifically because the city was just a
short distance from Netflix’s headquarters in Los Gatos. “We’re
able to tap into the talent of Netflix,” says Lachman, who has
lured three of the company’s employees over to Pley to help with
its back-end operations and technical support for its
distribution centers.

“Silicon Valley is a hotbed of technology, and a lot of the
successful subscription-based companies are founded there,” says
Lachman. “We felt there was a mindset around that that was
useful.”

Still, Pley has developed plenty of its own unique capabilities,
including an algorithmic weighing system that can tell up to one
one-hundredth of a gram how many pieces are missing from each set
that a family returns. With the help of imaging technology and a
little human intervention, the system also replaces the missing
pieces before a set gets sanitized then redistributed to another
family. (Pley’s “play nice” policy allows for up to 15 missing
pieces before a family gets a courtesy email asking them to
return additional Legos within 10 days, or risk getting dinged
with a restocking fee that’s equivalent to 40 percent of a set’s
cost.)

Also, unlike Netflix, which has long mailed a new DVD only when
an old one has been received, Pley starts shipping another Lego
set once a mail carrier picks up the old one. The company is also
rolling out a video-based feature that would show a child
multiple ways to build structures—like both a submarine and a
castle—from the same set. And there are regular discussions about
launching new product lines aside from Lego across a variety of
age groups, such as toy trains for toddlers or dolls for young
girls.

Lachman says that if Pley grows enough—say, to 300,000
families—the company could expand to new kinds of toys. But for
right now he's more concerned about getting a large user base
interested in Legos. Says Lachman, “What we are building is
operational excellence that will deter people on trying to get
into the space.”